CNN talks up Amazon Web Services

In a CNN article published on February 1st they announce that Amazon is now selling “data center services”.

These services are Amazon’s Web Services offerings – found here.

The tone of this article is interesting in that CNN highlights Amazon’s track record of innovating their business model.

Critics thought it was over the top when Amazon.com Inc. expanded from books into music in 1998. When the Web retailer let competitors start selling things alongside its own inventory in 2000, they said Amazon had gone nuts.

In both cases, Amazon proved them wrong. Media sales now total in the billions each quarter, and third-party merchandise, more profitable for Amazon than its own wares, makes up nearly a third of everything sold through the site.

Now, Amazon is making an even greater stretch — selling storage, computing power and other behind-the-scenes data center services.

This track record shows an amazing degree of bravery and intelligent risk taking on the part of Amazon’s leadership.

More after the jump…

I – and we all should – admire this trait in Amazon. Having the fortitude to innovate your business model in both complementary and completely new directions is difficult to not only contemplate – but to sell to leadership, the board and investors.

Most companies do not have the ability to undertake these types of business model innovations. That being said, I believe Amazon has hit upon a fundamental component of success in the 21st century. The challenge facing any business today is that in the global economy – no business model will remain unchallenged long. The way to stay ahead is to constantly challenge the limits of your own business model – and to be unafraid to diversify your business model when appropriate opportunities present themselves.

My social telephony startup – cosinity – relies on Amazon’s Web services (specifically S3) for bulk storage of recorded phone calls. This allows us to both scale and reduce our fixed and non-fixed costs.

Amazon gets it – they are focusing on being the back-end for a whole new generation of innovation.

More broadly, Amazon Web Services, as the business is called, could improve chances for a new generation of Web startups by slashing how much they spend up front on costly infrastructure.

MileMeter Inc., a Dallas-based startup that plans to sell auto insurance by the mile, started out running its own server in a data center. Recently, it moved most of its applications onto virtual computers in Amazon Web Services’ Elastic Compute Cloud.

EC2 lets its customers quickly start up a virtual computer in the “cloud” — industry slang for data centers around the world — then use it as a Web server or for crunching data and shut it down just as fast.

“I don’t need to have a systems administrator or a network administrator,” said Chief Executive Chris Gay. “I don’t have to worry about hardware becoming irrelevant.”

In short Amazon is both adopting business model innovation as a core competency, and also creating a business model enabling innovation.

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